The widespread myth that perfect credit and large down payments are
necessary to buy a home are holding many potential home buyers on the
sidelines. According to
Ellie Mae’s latest Origination Report, the average FICO score for all closed loans in May was 724, far lower than the 750 or 800 that many buyers believe to be true.
Below is a graph of the distribution of FICO scores of approved loans in May
(the latest available data):
More and more experts are speaking up about
the fact that if potential buyers realized they could be approved for a
mortgage with a credit score at, or above, 600, the distribution in the
chart above would shift further to the left.
Ellie Mae’s Vice President, Jonas Moe encouraged buyers to know their options before assuming that they do not qualify for a mortgage:
high median credit score is due to many millennials believing they
won’t qualify with the score they have - and are therefore waiting to
apply for a mortgage until they have the score
they think they need.”(emphasis added)
CoreLogic’s latest MarketPulse Report agrees that the median FICO score does not always tell the whole story:
observed decline in originations could be a result of potential
applicants being either too cautious or discouraged from applying, more
so than tight underwriting as the culprit in lower mortgage activity.”
not just millennials who believe high credit scores and large down
payments are needed. Many current homeowners are delaying moving on to a
home that better fits their current needs due to a belief that they
would not qualify for a mortgage today.
So what does this all mean?
Moe put it this way:
“Many potential home buyers are 'disqualifying' themselves. You don't need a 750 FICO Score and a 20% down payment to buy.”
you are one of the many Americans who has always thought homeownership
was out of your reach, let’s get together to start the process of
getting you pre-qualified and see if you are able to buy now!